CANDEAL (1446) FY2026 Q1 Earnings Report

Quick View

Executive Summary

In Q1, the Company delivered higher revenue and profit, accompanied by an improvement in gross margin, resulting in a high-quality earnings performance in which profit growth outpaced revenue growth. Revenue was ¥3.54B (+4.8% YoY), Operating Income was ¥0.11B (+19.8%), Ordinary Income was ¥0.11B (+22.8%), and Net Income attributable to owners of the parent was ¥0.05B (+39.0%). The improvement in gross margin (approximately +63bp YoY) absorbed the increase in SG&A expenses and drove the increase in Operating Income.

Factors Affecting Performance

【Revenue】Revenue was ¥3.54B, an increase of +4.8% YoY. The Company operates as a single segment in the construction services-related business, limiting its ability to absorb fluctuations through business diversification. Progress against the full-year company plan of ¥15.0B (YoY +8.2%) was 23.6%, slightly below the standard 25% benchmark, indicating that growth acceleration will be required from Q2 onward.

【Profit and Loss】Operating Income was ¥0.11B (+19.8%), Ordinary Income was ¥0.11B (+22.8%), and Net Income was ¥0.05B (+39.0%), with all three exceeding the revenue growth rate. Gross margin was 36.6%, improving from approximately 36.0% in the same period of the previous year, and the decline in the cost ratio contributed to the increase in profit. Meanwhile, SG&A expenses are estimated to have increased by approximately 5.6% YoY, expanding at a pace above the 4.8% revenue growth rate, while the SG&A ratio edged up to 33.5%. The effective tax rate was high at 54.4%, placing a certain constraint on the efficiency with which the increase in Profit Before Tax translated into Net Income. The Company achieved higher revenue and profit, but the quality of the profit increase is structurally dependent on gross margin improvement.

Segment Analysis

As the Company operates as a single segment in the construction services-related business, segment-specific disclosure has been omitted.

Key Financial Indicators

【Profitability】The Operating Income margin was 3.1%, improving from approximately 2.7% in the same period of the previous year, but remaining below 5%, indicating a thin profit buffer. The Net Income margin rose to 1.4% from approximately 1.1% in the same period of the previous year.【Cash Quality】The effective tax rate was high at 54.4%; corporate income taxes and other taxes of ¥0.06B were recorded against Profit Before Tax of ¥0.11B, constraining after-tax profitability.【Investment Efficiency】Annualized ROE was 6.8%, decomposed into a Net Income margin of 1.4% × total asset turnover of 2.34x × financial leverage of 2.06x. The low Net Income margin is the primary constraint on ROE.【Financial Soundness】The Equity Ratio improved to 48.6% from 47.1% in the previous year. The current ratio was 130.8% and the quick ratio was 125.5%, indicating that short-term liquidity has been maintained; however, current liabilities accounted for 79.4% of total liabilities, indicating a high dependence on short-term funding. Goodwill of ¥1.68B accounted for 57.2% of net assets, making it a key issue in assessing asset quality.

Cash Flow Analysis

As no cash flow statement has been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥1.60B, a slight decrease from ¥1.63B in the same period of the previous year. Accounts receivable were ¥1.74B, down from ¥1.92B in the same period of the previous year, suggesting that cash collection progressed. Meanwhile, accounts payable were ¥0.42B, down from ¥0.55B in the same period of the previous year, indicating that payment-side compression also progressed. Against short-term borrowings of ¥0.85B, cash and deposits provided coverage of 1.88x, maintaining short-term funding liquidity. Interest-bearing debt was ¥1.07B, the Debt/Capital ratio was 26.7%, and interest coverage was 27.11x, indicating a sound capacity to service interest payments.

Earnings Quality

The increase in profit for the current period was driven by a recurring factor—an improvement in gross margin—and no temporary factors such as extraordinary gains or losses have been identified. Non-operating income and expenses were both immaterial, and the divergence between Ordinary Income and Net Income was primarily attributable to the corporate tax burden. The effective tax rate was high at 54.4%, and the tax burden coefficient was only 0.455. Accordingly, the growth in Net Income (+39.0%) partly reflects the low tax burden in the same period of the previous year, relative to the growth in Profit Before Tax (+22.8%). Comprehensive Income was ¥0.05B, almost identical to Net Income of ¥0.05B, indicating that the impact of other comprehensive income items, such as valuation differences on securities, was limited and that factors distorting earnings quality were minimal.

Earnings Forecast and Guidance

The full-year company plan is Revenue of ¥15.0B (YoY +8.2%), Operating Income of ¥0.48B (+14.1%), Ordinary Income of ¥0.46B (+10.2%), and Net Income of ¥0.20B. Q1 progress rates were 23.6% for Revenue, 22.9% for Operating Income, 23.7% for Ordinary Income, and 25.1% for Net Income. While Net Income was roughly in line with the standard 25% progress benchmark, Revenue, Operating Income, and Ordinary Income were all slightly below the standard level. Further acceleration in revenue growth will be the key to achieving the full-year plan.

Shareholder Returns

The full-year dividend forecast is ¥10.0 per share. Based on forecast full-year Net Income of ¥0.20B and an average number of shares outstanding during the period of 926.37万 shares, the annual total dividend is estimated at approximately ¥0.093B, resulting in an expected Payout Ratio of approximately 46.3%. This figure is the dividend-only Payout Ratio and is not the Total Return Ratio, which includes share buybacks. As it remains below 60%, the burden on profits is not excessive, assuming achievement of the full-year plan.

Risk Factors

1. High goodwill ratio: Goodwill of ¥1.68B accounts for 57.2% of net assets of ¥2.94B. If the acquired businesses underperform their earnings plans, impairment losses could have a significant impact on net assets and profit.

2. Dependence on short-term liabilities: Current liabilities account for 79.4% of total liabilities, and short-term borrowings of ¥0.85B are equivalent to approximately 53% of cash and deposits of ¥1.60B. Although cash provides 1.88x coverage of short-term borrowings, sensitivity to changes in the financing environment remains.

3. Low profit buffer: The Operating Income margin remains at 3.1%, below 5%. Increases in material costs, labor costs, and outsourcing expenses, as well as deterioration in project profitability, could have a relatively significant impact on profit.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (construction)

Profitability and Returns

Comparative data for the Company's Operating Income margin and Net Income margin against the industry median is not yet available; in absolute terms, the Company has a low-margin structure below 5%.

Growth and Capital Efficiency

Comparative data for the Revenue growth rate against the industry median is also not yet available; however, compared with the full-year plan growth rate of 8.2%, growth in Q1 was moderate.

Source: Compiled by the Company

Key Earnings Highlights

1. In Q1, Revenue increased by +4.8% while Operating Income increased by +19.8%, marking a start with profit growth accompanied by gross margin improvement. However, the Operating Income margin remained at 3.1%, and absolute profitability remains low.

2. The fact that goodwill accounts for 57.2% of net assets and current liabilities account for 79.4% of total liabilities requires ongoing monitoring from both asset quality and funding structure perspectives.

3. Progress against the full-year plan was in line with the standard benchmark at 25.1% for Net Income, but Revenue and Operating Income were slightly below 25%, making growth acceleration in the second half a prerequisite for achieving the plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥282–¥298 at ±1% for the cost of equity, and ¥289–¥291 at ±0.1 for ω.

Notes:

• Net Income is significantly compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (Net Income ÷ Operating Income 42%). This value reflects that compression at face value; if these factors are temporary, underlying earning power may be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• The goodwill-to-net-assets ratio is high, and the assumptions would change significantly if impairment were recognized.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation for any specific investment action, nor does it predict or guarantee the future share price.)

---

This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

---End of Report---